Civilization Under Strain

October 10, 2017

Catalan is the latest place to see tribal forces running amuck. The separatist leader Carles Puigdemont appears poised to declare complete or perhaps qualified independence from Spain, setting the stage for more violence with Spanish police. The IBEX has declined 0.9%.

The dollar is on its heels following holidays Monday in The U.S., Japan, Canada and South Korea. The U.S. currency in early Tuesday trading dropped 0.7% against the yuan, 0.3% relative to the euro, Aussie dollar, Mexican peso and sterling, 0.2% versus the loonie and Swissie, and 0.1% vis-a-vis the yen.

Equities in the Pacific Rim climbed 1.6% in South Korea, 0.6% in Japan, 0.4% in Hong Kong and 0.3% in China. Stocks are down 0.4% in Italy and 0.1% in Germany but up 0.2% in Great Britain.

The ten-year British gilt and German bund yields have risen by two and one basis points, respectively.

In the United States where climate change deniers gun rights lovers control government at all levels, each day seemingly brings a new disaster — smoke in the Pacific Northwest, rhetorical threats against several foreign allies and foes, a parade of hurricanes, the biggest mass shooting ever, and now California’s Napa region engulfed in fire.

U.S. small business sentiment according to the NFIB gauge dropped 2.3 points in September to 103.0, the weakest reading of 2017 thus far. Tax reform legislation seems endangered by President Trump’s unrestrained personal attacks against Congressional leaders of the Republican Party.

Among foreign economic data reported this day,

Japan’s current account surplus widened to JPY 2.38 trillion in August from JPN 1.97 billion a year earlier on strong two-way commerce that saw exports climb 16.3% and imports go up 15.1%. The seasonally adjusted current account surplus of JPY 2.267 trillion in August was 11.4% greater than July’s.

Japan’s economy watchers index, a barometer of service sector activity as perceived by workers, 1.6 points in September, rising above the 50 threshold for the first time this year to a reading of 51.3. Japanese bankruptcies, which had posted a 12% on-year drop in August, were 4.6% greater in September than a year earlier.

An already massive British merchandise trade deficit widened by a further 11% on month to GBP 14.24 billion in August. The goods and services deficit of GBP 5.625 billion was practically twice as much as July’s shortfall of GBP 2.87 billion.

British industrial production grew by an as-expected 0.2% in August and was 1.6% higher than a year earlier. Construction output went up 0.6%. The British Retail Consortium’s measure of same-store retail sales indicated a 1.9% on-year advance in September, up from 1.3% in August and 0.9% in July.

The EUR 17.8 billion German current account surplus in August was 5.3% bigger than a year earlier. The seasonally adjusted trade surplus of EUR 20.5 billion per month in July-August was a tad wider than the second-quarter mean of EUR 20.2 billion per month.

Italian industrial production growth accelerated to 1.2% in August, while French industrial production contracted by 0.3%. On-year changes of +5.7% in Italy but up just 1.1% in France also were far apart.

Consumer prices in the year to September rose 1.6% in Denmark and Norway, 1.0% in Greece, 2.5% in Hungary, 0.1% in Cyprus but 6.4% in Mexico.

The IBD/TIPP U.S. Optimism index gets reported later today, and FOMC minutes will be published tomorrow.

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